WITH REPRESSION silencing most street protests for the moment as hardliners tighten their grip, is a democratic transformation--or revolutionary change--possible in Iran?

Answering that question requires looking at Iranian history, politics and society beyond the disputed June 12 election, in which the government made the outrageous claim that incumbent President Mahmoud Ahmadinejad received more than 62 percent of the vote--24.5 million, compared to 11 million votes for his leading opponent, Mir Hussein Mousavi, who was gaining growing support in the weeks before the vote.

In the aftermath of the election, what began as a factional dispute between two wings of the Iranian ruling class sparked mass demonstrations in the capital city of Tehran that, according to the city's mayor, involved some 3 million people.

While the protests have receded in the face of vicious attacks by security forces--which killed at least 17 and arrested hundreds--Iranian politics will never be the same. The country's rulers and institutions are discredited, and the pro-democracy movement, previously led by students and intellectuals, has greatly expanded its social depth.

Protesters in Tehran rally against the dubiouse election results and mourn the deaths of other protesters (Ehsan Maleki | Sipa)

Rather than end that movement, the government's crackdown marks the beginning of the movement's transformation into a more powerful social force in the months and years ahead.

But before looking at the roots of that movement and the prospects for its development, it's necessary--strangely enough--to take up the question of whether the Iranian popular struggle is a legitimate one.

Both neoconservatives on the right and some prominent figures on the left have argued--echoing Ahmadinejad--that the protests are just the noisy complaints of disgruntled middle-class minority that's sore over an election loss. Some on the left further suggest that U.S. covert operations must be behind the protests--given Washington's funding and support for the color-coded "revolutions" that toppled leaders in Serbia, Ukraine and other countries.

Certainly the U.S. is intervening in Iran by imposing economic sanctions over that country's nuclear energy program. It is also aiding armed rebellions by national minorities, such as the Kurds and Balochis, and allowing an Iranian Sunni Muslim extremist group, Jundallah, to conduct terror campaigns in Iran from across the border in Pakistan.

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But the idea that Iran's mass democracy movement is a creation of Washington is simply ludicrous. This argument was systematically debunked by Reese Erlich, the veteran independent journalist and author of a recent book on Iran, who was in Tehran during the elections. In an article titled, "Iran and Leftist Confusion," he wrote:

[T]he multi-class character of the most recent demonstrations, which arose quickly and spontaneously, were beyond the control of the reformist leaders in Iran, let alone the CIA...

Frankly, based on my observations, no one was leading the demonstrations. During the course of the week after the elections, the mass movement evolved from one protesting vote fraud into one calling for much broader freedoms. You could see it in the changing composition of the marches. There were not only upper-middle-class kids in tight jeans and designer sunglasses. There were growing numbers of workers and women in very conservative chadors.

Erlich's observations are correct. The social composition of the movement has changed rapidly--and its further development will require sinking more roots into the working class. To better understand how the movement took shape, and its future prospects, it's helpful to look briefly at the history of Iranian politics in the 30 years since the 1979 revolution.

Revolution and counterrevolution

IF THE hardliners around Ahmadinejad and Supreme Leader Ayatollah Ali Khamanei are seeking to crush the revolt in Iran today, it's because they well remember the revolutionary potential of the Iranian working class.

Its mass strikes compelled the U.S.-backed dictator, the Shah of Iran, to flee the country. "Indeed, the entry [into activism] of the working class made possible the eventual triumph of the Islamic Revolution," wrote Ervand Abrahamian, a leading historian of Iran. Abrahamian continued:

By the third week of October [1978], a rapid succession of strikes crippled almost all the bazaars, universities, high schools, oil installations, banks, government ministries, post offices, railways, newspapers, customs and port facilities, internal air flights, radio and television stations, state-run hospitals, paper and tobacco plants, textile mills and other large factories. In effect, the working class had joined the middle classes to bring about a massive and unprecedented general strike...The Shah faced not just a general strike but a political general strike...

[B]y December 25, a series of general strikes had again brought the whole economy to a grinding halt, and grassroots strike committees had occupied many large factories, government ministries and communications centers.

These factory councils, or shoras in the Farsi language, were classic examples of workers' power seen in previous revolutions, as in the Russian soviets in 1905 and 1917, Barcelona in 1936 and Hungary in 1956. But the central leader of the revolution wasn't the left, but the clergy and middle-class elements who looked to Ayatollah Ruhollah Khomeini. Khomeini appropriated the language and demands of the left to call for an Islamic society.

After Khomeini's return to Iran from exile in February 1979, revolutionary committees loyal to him set up an Islamist parallel to a provisional revolutionary government. These forces dismantled working-class organization and divided the left--and later, violently smashed it. Iraq's 1980 invasion of Iran, launched with the approval of the U.S., created a siege atmosphere that helped Khomeini and the clerics consolidate their power.

As historian Nikki Keddie explained in her history of modern Iran:

Increasingly in the post-revolution period, political power was concentrated in the hands of the Khomeneist clergy and the bazaar bourgeoisie. Soon after the revolution, there were land seizures by peasants in some regions, and factory strikes and workers' committees set up in urban areas, but the authorities, whether by compromise, persuasion or force, gradually brought such movements under control.

Post-revolution faction fights

After imprisoning, executing or forcing into exile its opponents on the right and left, the new ruling class soon divided into rival political groupings. Central to the debate was how to manage the economy. Large sections of industry came under control of the state or religious foundations controlled by Shia clergymen who were closely tied to the state.

The divisions broke out roughly into three camps: an Islamist left, which maintained some of the social rhetoric of the revolution; an Islamist right, based around the most conservative clergy; and a pragmatic right dominated by clerics who were close to, or had become part of, big business interests. Over the next two decades, these factions would clash over how Iran should engage with the world, economically, politically and culturally.

During the Iran-Iraq War of 1980-88, the Islamist left was ascendant. Mir Hussein Mousavi, then prime minister, oversaw extensive state control of Iran's economy. Government rationing was used to feed workers and the poor during periods of runaway inflation of food prices.

Mousavi justified his policies on religious grounds. "The way of Islam is to attend to social justice," he said, adding elsewhere, "the security of the revolution lies in the eradication of poverty and serving the destitute...Capital must not rule and the priority of the regime should be the poor and not the well-off." Mousavi's economic policies emulated earlier attempts at using state capitalist methods of national development, as pursued by Egypt under the Nasser governments of the 1950s and 1960s.

The end of the war, and Khomeini's death a year later, brought the factional struggles into the open. The cleric Ali Akbar Hashemi Rafsanjani, a wealthy businessman and leader of the pragmatic right, forced a constitutional change that eliminated the post of prime minister, and soon was elected president himself. He succeeded Ali Khamanei, who went on to replace Khomeini as supreme leader, despite a lack of religious qualifications for the post.

Rafsanjani, a staunch defender of private property, favored more engagement with the West. (Rafsanjani had been a key player in the Iran-Contra scandal, in which Iran bought U.S.-made weapons in exchange for helping to get Western hostages released in Lebanon. The money Iran spent on weapons went to fund Nicaragua's right-wing counterrevolutionary uprising, in violation of U.S. law.)

In his two terms as president, Rafsanjani failed to find a way out of Iran's international isolation. The economy recovered partially from the devastation of the war years, as Rafsanjani used the state to rationalize industries with the aim of development, following the example of the East Asian "tiger" economies.

But Iran's economy was still weak, vulnerable to slumps in oil prices and beset by chronic inflation. Workers' living standards declined, leading to riots in 1992 and, despite savage repression, again in 1994-95.

With Rafsanjani barred by Iran's constitution from seeking a third term in the 1997 presidential elections, the pragmatic conservatives aligned themselves with elements of the Islamist left. With its faith in state-controlled industry shaken by the collapse of the USSR, the Islamist left shifted towards the pro-market, neoliberal policies that had come to dominate the world economy.

Thus, the Islamist left morphed into reformers who emphasized political freedoms, human rights and an easing of state-imposed Islamist behavioral norms. And with the backing of Rafsanjani and his allies, the reformist candidate, Mohammad Khatami, a former minister of culture, won the 1997 presidential vote by a landslide.

But in his two terms in office, Khatami failed to deliver. The Islamist right, thanks to support from Supreme Leader Khamanei, controlled all key government ministries and stymied most reforms. Khatami also failed to protect students in the pro-democracy movement, whose protests were violently attacked by police and the basij, a paramilitary force based in the mosques and controlled by the right. Pro-reform newspapers were regularly shut down by the authorities, and their editors detained. In 2004 the clerics' Guardian Council, which must approve candidates for office, barred 2,000 reformers from running for the majlis, or parliament, including 80 incumbents.

The intellectuals and middle class elements who had high hopes in Khatami felt disillusioned, if not betrayed.

Workers, who were promised little by Khatami, faced much worse conditions. Khatami's economic program promoted privatization and deregulation, which led to stepped-up attacks on wages and working conditions, even as the traditional bazaar bourgeoisie blocked most economic reforms. Unemployment and persistent inflation added to workers' misery.

As the Khatami era wound down, workers began to make their own voices heard through a series of struggles that defied the ban on independent unions. In January 2004, 1,500 workers at a copper smelting plant near the village of Khatonabad went on strike and occupied their plant when management fired all but 250 of them. After eight days, security forces shot into the crowd from helicopters, killing as many as 15 workers and injuring 300. Eighty were arrested; upon their release, they showed signs of torture.

Rather than having a chilling effect on strike action, the repression spurred similar action across the country in a variety of different plants, and a strike in March 2004 that involved up to a third of Iran's teachers.

Workers often organized these actions by setting up workplace-based charity committees that served as underground unions. In the northeastern town of Gilan, workers fighting privatization in 2004 revived the workers' councils, or shoras, that had first emerged during the revolution.

In their 2007 book Iran on the Brink, journalists Andreas Malm and Shora Esmailian interviewed several workers about their struggles. One of the workers in the important Khodro plant, the largest vehicle plant in the Middle East, explained their brief strike action in January 2004:

The only thing we want is the right to improve our situation. We fight for the right to go on strike, to form a union, all these basic democratic rights. Everything we do must be kept secret. But we can't just sit twiddling our thumbs, waiting for the Islamic Republic to fall. We must take the right to organize, practice it, without waiting for someone's permission. That means we must be ready to sacrifice, as the people did in Khatonabad.

Perhaps the best-known Iranian workers' struggle outside the country is that of the Tehran bus drivers, who have braved beatings, arrest and imprisonment for fighting to create an independent union. In 2005, the 17,000-member Syndicate of Workers of Tehran and Suburbs Bus Company refused to accept riders' fares to protest fare hikes and bad working conditions. Union leader Mansour Osanloo was arrested; upon his release, he led another strike in 2006 and was imprisoned soon afterward.

The Islamist right strikes back

Khatami's reform program was seen by the Islamist right as a mortal threat. To counter it, the conservatives built up networks of former Revolutionary Guards, an elite military force--as well as the basij, a kind of paramilitary organization intertwined with, and funded by, the mosques and the bazaar bourgeoisie and backed by the national security establishment.

The basij were given official status by the majlis in 1992. Later on, they were charged with enforcing religious laws known as Propagation of Virtue and Prohibition of Vice. "Essentially, this meant 'unleashing' the basijis as the moral soldiers of the Islamic Republic, more specifically the conservative right factions," wrote historian and author Mehdi Moslem.

The basij thus helped build the careers of a cadre of Islamist student revolutionaries from the 1970s who had become members of the Revolutionary Guard during the Iran-Iraq War.

One of those war veterans was Mahmoud Ahmadinejad, whose political connections got him promoted from governor of a small province to appointment as mayor of Tehran, where he used the basij to build a political machine. Khamanei became the sponsor and protector of this younger generation of Islamist rightists, and threw his weight behind Ahmadinejad as the right's candidate in the 2005 presidential race.

The high rate of abstention from pro-reform candidates, plus some likely vote-rigging, vaulted Ahmadinejad from nowhere into a runoff election against Rafsanjani. Ahmadinejad presented himself as a populist with a modest lifestyle, in contrast to the very wealthy Rafsanjani, a figure often accused of corruption and whose family dominates the lucrative market for pistachio exports.

Ahmadinejad's pseudo-populism

The conventional media portrayal of Iranian politics is a contest between the populist Ahmadinejad, who has the backing of the rural poor and workers, versus the middle-class and wealthy backers of the reformers around Mousavi.

In reality, Ahmadinejad's populism is a pose, notwithstanding his grab bag of local development programs and some highly publicized, pre-election handouts and bonuses for state employees. Ahmadinejad last year tried to remove subsidies on staple goods for the poor in exchange for higher state benefits--although inflation would have soon eliminated those gains.

To be sure, Ahmadinejad differs with the reformers about the extent to which Iran's economy should open to the West and what types of investments should be pursued. But he shares their neoliberal framework--and his embrace of privatization bears this out.

As left-wing Iranian scholar Kaveh Ehsani points out, shortly after Ahmadinejad's 2005 election victory, Supreme Leader Khamanei himself gave privatization a major push by issuing an order reinterpreting the Iranian constitution's support for a state-dominated economy.

As a result, he writes, "the government was ordered to reduce its share in "non-essential" sectors annually by 20 percent and to privatize some 80 percent of its assets in "essential" sectors--mining, heavy industry, downstream oil and gas, banking, insurance, energy, communications and even some military industries."

Ahmadinejad pursued this agenda with gusto. As journalist Billy Wharton points out, the Iranian president has already privatized the postal service, sold shares in two state-owned banks and a sale of 5 percent of shares in a state-owned steel company. According to the Iran Privatization Organization, a state ministry, some 247 state enterprises been partly or fully privatized since Ahmadinejad took office in 2005.

Ahmadinejad has tried to camouflage the privatization process by doling out "justice shares" of stock in privatized state companies to the poor. These assets, distributed to about 6 million people, were worth $2.5 billion in the first two years of Ahmadinejad's term.

The model here is the privatization process in Russia and Eastern Europe, where crooked entrepreneurs were able to buy up the stocks for cheap to create huge new private monopolies based on former state assets. In any case, stocks thinly scattered among the poor won't provide much help for the 8 million people (out of a population of 76 million) who live in extreme poverty.

Nevertheless, as Ehsani points out, the state still dominates the Iranian economy, with 500 big state-owned companies that account for 76 percent of the national budget and two-thirds of Iran's gross domestic product (GDP). That means the real fruits of privatization have yet to be plucked by private Iranian capital--so the question of who will benefit from the sell-off of state assets was a looming issue behind the 2005 vote.

Indeed, if Ahmadinejad succeeds in handing the benefits of privatization to his allies in the basij and the security apparatus, it could reconfigure Iranian capitalism. The Islamist right and the war veteran generation could make the transition from their careers in the national security apparatus and sanctions-busting smuggling operations into entrepreneurs, much as the Stalinist bureaucrats did in Russia during the 1990s.

That's a threat to established business tycoons like Rafsanjani and his allies, who could be marginalized by new players. And at the same time, the reformers around Mousavi would lose the strategic levers that they believe they need to restructure Iranian capitalism on a more rational basis.

Election, coup and resistance

All this set the stage for the sharp split in the Iranian ruling class around the June 12 vote.

Rafsanjani went all out for his old rival Mousavi in order to stop Ahmadinejad and Khamanei. And Mousavi used televised debates to cut into Ahmadinejad's claim of economic success, highlighting the difficulties facing workers and the poor. The strategy worked, producing a late surge for Mousavi in the form of massive election rallies in Tehran and other cities that brought in supporters far beyond the stereotypical middle-class base of the reformers.

Young people were particularly energized--not only because of Mousavi's promise of a more liberal stance on social questions, but because of their terrible economic circumstances. In recent years, the jobless rate for men in their early 20s has been above 20 percent. For women that age, unemployment is estimated at 40 percent.

This display of mass support for Mousavi panicked Ahmadinejad and Khamanei into announcing an overwhelming victory for the incumbent in order to avoid a second-round election contest between the two. In this way, what began as a faction fight between two wings of the ruling class turned into a virtual coup.

Since the June 12 coup, the protests by millions in the street have been battered down by repression carried out mainly by basij thugs on motorcycles. The video recording of the murder of a young woman, Neda Agha Soltan, has become a symbol of the mass outrage over the repression.

While the mass protests have subsided, smaller demonstrations continue. And the splits in the Iranian ruling class have meant that the repression, while terrible enough, isn't nearly as bloody as it could have been. That's a sign that Ahmadinejad and Khamanei are still somewhat tentative in their clampdown.

If they show weakness by making some sort of power-sharing deal with Mousavi and Rafsanjani, they risk encouraging the movement to push for even greater change. But if they move decisively against Mousavi and Rafsanjani with arrests and imprisonment, the regime would shed whatever legitimacy it has left, and become simply a police state.

There are rough parallels here with the revolutionary crises in Eastern Europe under Stalinism, such as in Hungary in 1956 and Czechoslovakia in 1968. There, divisions between reformers and hard-liners led each side to try to mobilize mass support, thereby destabilizing the entire system. Ultimately, such splits led to paralysis and collapse in the revolutions of 1989.

In the case of Iran, a dispute over a stolen election has opened the way to a mass upsurge for democracy and a movement that won't simply evaporate under repression. The size and character of the movement inevitably raises social questions and the need for the independent organization of the working class and the revival and extension of workers' struggles that emerged in recent years--most recently, in the illegal May Day protests earlier this year.

The pro-democracy movement among students, the underground unions and the street protesters that emerged in recent weeks together have the potential to interact to create a new movement for democracy and revolutionary change. The international left must do all it can to support that struggle.

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